Gold Standard Popular for Debate, But Not in Practice

Calls for a return to the gold standard are in vogue but not new, and won't like materialize into reality even if a sympathizer wins the White House.

In 1980, just before Ronald Reagan swept the elections, gold prices were sky high, U.S. competitiveness was slipping and talk was abuzz that the country needed a gold standard, which attaches the value of the dollar to gold.

Today there's a Democrat in the White House, gold prices are soaring, and Republican hopefuls have expressed some desire to at least explore the idea of a return to the gold standard, Newt Gingrich especially.

“Part of our approach ought to be to re-establish something Ronald Reagan did in 1981 and that is to have a commission on gold to look at the whole concept of how do we get back to hard money,” Gingrich said recently, according to the New York Times.

Studying the idea is about as far as it will go, as Regain never seriously followed up on it, and few will.

Part of the allure behind a gold standard is that it would prevent the Federal Reserve from printing too much money and encouraging excessive borrowing, which threw the country into its current economic mess in the first place.

However, while Central Banks can mess up, they can fix their mistakes, experts point out.

"The gold standard adds credibility when a country lacks discipline," says Edward Lazear of Stanford, who served as chairman of the Council of Economic Advisers under President George W. Bush, the New York Times reports.

"The cost is monetary policy flexibility. The trade-off is unclear in the U.S."

Other experts point out that a gold standard brings all new risks of its own.

"Since gold has supply and demand dynamics of its own, for reasons unrelated to its use as a store of value, Americans would exposed to risk," says Caroline Hoxby of Stanford University, upon participating in a University of Chicago survey on the issue, according to the AFP newswire.